The 'Rate Gain/Loss' Maintenance Function
This page describes the 'Rate Gain/Loss' Maintenance function in the Nominal Ledger.
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The 'Rate Gain/Loss' Maintenance function in the Nominal Ledger will update the foreign Currency balances of specified Accounts using the latest Exchange Rates. In some countries, it is necessary to run this function before producing a Balance Sheet report.
The operation of this function will be controlled by the Rate Gain/Loss setting in the Nominal Ledger. It will update the balances of every Currency Balance Sheet Account (i.e. every Asset, Liability and Equity Account in which a Currency has been specified).
The 'Rate Gain/Loss' function will check the balances of every Asset, Liability or Equity Account in which a Currency has been specified. The balance of such an Account will be stored in two Currencies: the Currency of the Account and Base Currency 1 (your home Currency). The function will convert the Currency balance of each Account to Base Currency 1 using the current Exchange Rate (or the Exchange Rate for a specified date). If the difference between the stored balance in Base Currency 1 and the balance calculated using the current Exchange Rate is greater than the Limit specified in the Rate Gain/Loss setting, a Nominal Ledger Transaction will be created in which the difference will be posted as a gain or loss resulting from the application of the current Exchange Rate. Where the application of the current Exchange Rate results in a loss, that loss will be debited to the Rate Loss Account specified in the Rate Gain/Loss setting and credited to the Account in question. Where a gain results, that gain will be credited to the Rate Gain Account specified in the Rate Gain/Loss setting and debited to the Account in question.
If you need to find out the value of the Transaction that will be created by this function and the Accounts that will be affected, run the Currency A/C Rate Change report first.
When you run the 'Rate Gain/Loss' function, the following specification window will appear:
- Date
- Paste Special
Choose date
- The 'Rate Gain/Loss' function will use the date that you specify here for the following purposes:
- The function will check the balance of each Account on this date. The balance of an Account will be stored in two Currencies: the Currency of the Account and Base Currency 1 (your home Currency).
- The function will convert the Currency balance of each Account to Base Currency 1 using the Exchange Rate applying on this date.
- If the difference between the stored balance in Base Currency 1 (point 1) and the Base Currency 1 balance calculated using the current Exchange Rate (point 2) is greater than the Limit specified in the Rate Gain/Loss setting, a Nominal Ledger Transaction will be created in which the difference will be posted as a gain or loss resulting from the application of the current Exchange Rate. The date that you specify here will be the Transaction Date in the new Transaction.
If you leave this field blank, the current date will be used.
- Accounts
- Paste Special
Account register, Nominal Ledger/System module
- Range Reporting Alpha
- If you wish to apply the function to a particular Account (or range of Accounts) specify that here. You can also enter several individual Accounts, separated by commas, and you can mix individual Accounts and ranges (e.g. 600:699,701,703,720:749). For an Account to have its balance updated by the function, it must have an entry in its Currency field, that entry must not be Base Currency 1 or 2 and it must be an Asset, Liability or Equity Account. The balances of Income and Expense Accounts will not be updated.
Press the [Run] button in the Button Bar to run the function. When it has finished, you will be returned to the 'Maintenance' list window.
If the function does not create a Transaction when expected, the probable reasons are:
- Every Account balance is already up-to-date, or any differences are less than the Limit specified in the Rate Gain/Loss setting.
- You have entered a date in the 'Specify Rate Gain/Loss' window that is not in a Fiscal Year.
- There is no valid record in the Number Series - Transactions setting. This might be a fault in the setting itself, or it might be because the default Transaction Number on the 'Number Series' card of the current user's Person record or in the Number Series Defaults setting (in the System module) is not in a valid Number Series. This problem will usually occur at the beginning of a new year. If you make a change to the 'Number Series' card of the Person record or to the Number Series Defaults setting, you will need to quit Standard ERP and restart for it to take effect.
Example
The examples below use the following posting and Exchange Rate:
- Posting
- Date: 31/12/2016
- Exchange Rate: 1.25 USD : 1 BC1 (home Currency)
- Value: 125.00 USD = 100 BC1
- First New Exchange Rate
- Date: 31/12/2017
- Exchange Rate: 1.75 USD : 1 BC1 (home Currency)
- 125.00 USD now buys 71.43, a difference of 28.57
- Second New Exchange Rate
- Date: 31/12/2018
- Exchange Rate: 2.25 USD : 1 BC1 (home Currency)
- 125.00 USD now buys 55.55, a difference of 15.87 with the previous year and 44.44 with the original Transaction
- If you run the 'Rate Gain/Loss' function with 31/12/2017 as the date, a Transaction will be created posting 28.57 as a gain or loss, with a balancing posting of 28.57 to the original Account.
- If you run the 'Rate Gain/Loss' function for a second time with 31/12/2018 as the date, a Transaction will be created posting 15.87 as a gain or loss, with a balancing posting of 15.87 to the original Account.
- If you run the 'Rate Gain/Loss' function only once with 31/12/2018 as the date, a Transaction will be created posting 44,44 as a gain or loss, with a balancing posting of 44.44 to the original Account.
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Exchange Rate Gains and Losses:
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